Agroforestry Insurance Decision Support Model
Cory Whitney
1 Decision Model for Agroforestry Insurance
Decision Analysis (DA) can be used to support practical decisions in agroforestry insurance design under risk and uncertainty. It can generate robust and science-based decision support by integrating data and expert knowledge on insurance mechanisms and their impacts on agroforestry systems. We demonstrate DA model development techniques to support the difficult task of deciding which insurance schemes to implement, given the complex nature of agroforestry risks and farmer perceptions.
The decisionSupport() function is part of the package
decisionSupport in the R programming environment. This
package was used for a Monte-Carlo-based selection of optimal insurance
strategies.
1.1 Model Structure
By coding a participatory conceptual model as a Monte Carlo
simulation using the decisionSupport() function, we were
able to offer decision makers probable outcomes in terms of Net Present
Value (NPV) and assess the resilience benefits of different insurance
schemes for agroforestry systems.
1.2 Input Table
The input table Agroforestry_insurance_input_table.csv
contains the variables used in the model with distributions described by
a 90% confidence interval, as well as the shape of the distribution.
| variable_name | lower_bound | upper_bound | distribution | description |
|---|---|---|---|---|
| participatory | 1 | 5 | posnorm | Level of stakeholder involvement in insurance design |
| neutral | 1 | 5 | posnorm | Impartiality in decision-making processes |
| farmers_understand_insurance | 1 | 5 | posnorm | Farmer comprehension of insurance terms and benefits |
| just | 1 | 5 | posnorm | Fairness and ethical considerations in insurance design |
| coverage_cultural_value | 1 | 5 | posnorm | Insurance accounts for cultural significance of risks |
| equity | 1 | 5 | posnorm | Fair distribution of benefits and costs |
| time_to_adjust | 1 | 5 | posnorm | Time needed for adaptation to new conditions |
| resources_to_cope | 1 | 5 | posnorm | Availability of cash, extension services, seeds |
| other_important_risks | 1 | 5 | posnorm | Presence of risks more critical than insured ones |
| fairness | 1 | 5 | posnorm | Overall fairness of insurance scheme |
| af_multiple_stages | 1 | 5 | posnorm | Agroforestry systems with multiple growth stages |
| diversity_of_group | 1 | 5 | posnorm | Variety of stakeholders sharing risks |
| transferability_risk | 1 | 5 | posnorm | Ability to transfer risk to third parties |
| redundancy_actors | 1 | 5 | posnorm | Backup systems and multiple service providers |
| factors_resilience | 1 | 5 | posnorm | Ecological and social resilience factors |
| sustainability_insurance | 1 | 5 | posnorm | Long-term viability of insurance scheme |
| ability_continue_farming | 1 | 5 | posnorm | Farmers’ capacity to maintain operations |
| farm_resilience | 1 | 5 | posnorm | Farm system ability to withstand shocks |
| economically_sustainable | 1 | 5 | posnorm | Financial viability for insurers |
| farmers_subscribe | 1 | 5 | posnorm | Insurance uptake rate among farmers |
| pay_out | 1 | 5 | posnorm | Compensation payment mechanisms |
| climate_justice | 1 | 5 | posnorm | Insurance as climate justice instrument |
| affordability_premium | 1 | 5 | posnorm | Premium cost relative to farmer income |
| level_micro_meso_macro | 1 | 5 | posnorm | Scale of insurance implementation |
| damage_assessment | 1 | 5 | posnorm | Accuracy and fairness of loss assessment |
| new_adaptation_strategies | 1 | 5 | posnorm | Development of innovative adaptation methods |
| spatial_geophysical | 1 | 5 | posnorm | Topography and physical landscape features |
| af_profile | 1 | 5 | posnorm | Diversity and size of agroforestry systems |
| socio_political | 1 | 5 | posnorm | Political stability and governance context |
| availability_insurance | 1 | 5 | posnorm | Accessibility of insurance products |
| cohesiveness_community | 1 | 5 | posnorm | Social unity and collective action |
| cultural_importance | 1 | 5 | posnorm | Cultural significance of insured assets |
| risk_perception | 1 | 5 | posnorm | Subjective assessment of risk severity |
| vulnerability | 1 | 5 | posnorm | Susceptibility to climate impacts |
| number_insured | 1 | 5 | posnorm | Total participants in insurance scheme |
| exposure_risks | 1 | 5 | posnorm | Degree of exposure to climate hazards |
| underwriting | 1 | 5 | posnorm | Risk assessment and premium setting |
| risk_mitigating_practices | 1 | 5 | posnorm | Adoption of risk reduction measures |
| damage | 1 | 5 | posnorm | Extent of losses from climate events |
| hazard | 1 | 5 | posnorm | Frequency and severity of climate hazards |
| what_is_insured | 1 | 5 | posnorm | Scope of insurance coverage |
| financing | 1 | 5 | posnorm | Funding sources and mechanisms |
| farmer_pays | 1 | 5 | posnorm | Farmer contribution to premiums |
| subsidized | 1 | 5 | posnorm | Level of government or donor subsidies |
| ease_claims | 1 | 5 | posnorm | Simplicity of claims process |
| indemnity_index | 1 | 5 | posnorm | Basis for compensation calculations |
| ease_getting_insurance | 1 | 5 | posnorm | Accessibility of enrollment process |
| ecological_conditions | 1 | 5 | posnorm | Environmental and climate factors |
| composition_insured | 1 | 5 | posnorm | Demographics of insured population |
| insurance_offered | 1 | 5 | posnorm | Types of insurance products available |
| decision | 1 | 5 | posnorm | Quality of decision-making processes |
| land_tenure | 1 | 5 | posnorm | Security of land ownership and access |
| design_process | 1 | 5 | posnorm | Inclusivity of scheme design |
| compliance_mechanism | 1 | 5 | posnorm | Enforcement of insurance terms |
| time_frame_policy | 1 | 5 | posnorm | Duration of policy coverage |
| gendered_decision_making | 1 | 5 | posnorm | Gender equity in decision-making |
| likelihood_extreme_events | 1 | 5 | posnorm | Probability of severe climate events |
| personal_savings_coverage | 1 | 5 | posnorm | Adequacy of personal risk management |
| external_influences | 1 | 5 | posnorm | Impact of external factors on decisions |
| past_experiences_damages | 1 | 5 | posnorm | Historical loss experiences |
| cultural_acceptance | 1 | 5 | posnorm | Social norms regarding insurance |
| expected_compensation | 1 | 5 | posnorm | Perceived benefits from insurance |
| dependence_insured_risk | 1 | 5 | posnorm | Economic reliance on insured assets |
| trust_insurers_farmers | 1 | 5 | posnorm | Confidence in insurance providers |
| portfolio_risk_management | 1 | 5 | posnorm | Diversity of risk strategies |
| uptake_insurance | 1 | 5 | posnorm | Actual adoption rates |
| data_availability | 1 | 5 | posnorm | Access to relevant risk data |
| motivations | 1 | 5 | posnorm | Drivers for insurance participation |
| feasibility_insurance | 1 | 5 | posnorm | Practical implementation potential |
1.3 Key Risk Categories in Agroforestry
1.3.1 Production Risks
- Climate variability and extreme weather events
- Pest and disease outbreaks
- Yield fluctuations across multiple species
- Tree-crop interactions and competition
- Long-term tree establishment risks
1.3.2 Market Risks
- Price volatility for multiple products
- Market access limitations
- Input cost fluctuations
- Value chain disruptions
1.3.3 Institutional Risks
- Policy changes affecting agroforestry
- Land tenure security
- Access to credit and insurance markets
1.4 Insurance Scheme Options
1.4.1 Index-Based Insurance
- Weather index insurance
- Yield index insurance
- Area-based yield indices
- Satellite vegetation indices
1.4.2 Traditional Insurance
- Multi-peril crop insurance
- Named-peril insurance
- Revenue protection insurance
- Whole-farm revenue insurance
1.5 Model Implementation
The decision model evaluates the net benefits of different insurance schemes for agroforestry systems, considering:
- Premium costs and administrative expenses
- Payout probabilities and amounts
- Risk reduction benefits
- Behavioral impacts on farm management
- Systemic risk factors
1.6 Results and Decision Support
The model provides probabilistic outcomes for each insurance scheme, allowing decision-makers to:
- Compare expected net benefits across options
- Assess risk-return tradeoffs
- Identify critical uncertainties
- Develop robust insurance strategies
1.7 Conclusion
This decision support model provides a structured approach to evaluating agroforestry insurance schemes, helping to bridge the gap between traditional risk management and the unique challenges of diversified agroforestry systems.